Peak Oil and the Dollar - 6/29/09

Despite high oil inventories oil prices continue to rise.  Some analysts say $70 oil is not high enough for suppliers cover their cost.  The real reason oil is going up is the dollar is going down plus many feel the “green shoots” are giving signs the recession may over soon giving for an increase in speculation in the markets. 

The dollar’s weakness is the massive deficit the U.S. government is running, and the sale of billions of dollars worth of treasury securities.

If the dollar continues to fall, more oil will be purchased and oil will continue to rise.  The U.S. economy is in worse shape than it was 18 months ago and could get worse if we see $4 a gallon gas again.  This takes away from consumer spending which would stop any recovery in the economy.

The U.S. Congress will not stand by and let oil prices increase driven by a falling dollar.  There could be a ban on speculation.  There also could be a worldwide agreement that could make the ban work.

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